436 F.

2d 804

PIC DESIGN CORP., Plaintiff, Appellee,

v.
BEARINGS SPECIALTY CO., Inc., Defendant, Appellant.
No. 7722.

United States Court of Appeals, First Circuit.

January 12, 1971.

Ansel B. Chaplin and Peter M. Saparoff, Boston, Mass., with whom

Gaston, Snow, Motley & Holt, Boston, Mass., were on the brief, for
appellant.
Harold James, with whom James & Franklin, New York City, James H.
Grover, and Roberts, Cushman & Grover, Boston, Mass., were on the
brief, for appellee.
Before ALDRICH, Chief Judge and McENTEE and COFFIN, Circuit
Judges.
McENTEE, Circuit Judge.

Plaintiff, a New York corporation, sued defendant, a Massachusetts

corporation, under the common law of unfair competition and also under the
Lanham Trademark Act.1 Both parties submitted affidavits, documentary
evidence, extensive memoranda of law and presented oral argument before the
district court, but no oral testimony was taken. On September 25, 1970, the
court entered a preliminary injunction against defendant, 317 F.Supp. 326, from
which it now appeals. See 28 U.S.C. 1292 (1964).

Plaintiff, Pic Design Corporation, is a large distributor of precision instrument

components.2 It was apparently one of the first companies to warehouse a large
supply of such components, which it lists in catalogs categorized in great detail
as to precision and dimensions. Each catalog item is identified by a specific Pic
catalog number. Some of plaintiff's competitors also catalog their products, but
they use different catalog numbers. Plaintiff manufactures some of the items it
stocks, but many are made elsewhere, usually to plaintiff's specifications and

drawings.
3

Defendant, Bearings Specialty Co., Inc., is a distributor of a broad line of

industrial components, including the type of precision instrument components
sold by plaintiff. From 1966 until May 26, 1969, defendant acted as an
"authorized resale agent" for plaintiff. Under this arrangement defendant was
listed as such in plaintiff's catalog. It benefited thereby in the form of increased
business but was required to sell Pic products at 20 percent above the catalog
price. The arrangement was terminated by mutual agreement after plaintiff
decided to phase out its local resale agents and defendant concluded that it was
unprofitable to operate on plaintiff's terms.

Defendant has conceded that during 1969 most of the orders it received for
precision instrument components made reference to plaintiff, either by using
the "Pic" name or a Pic catalog number. Defendant filled most of those orders
with products purchased from Allied Devices Corporation (Adco), whose
president, formerly the head of quality control at Pic, was intimately familiar
with Pic's stock. During that period Adco used Pic catalog numbers on its
invoices. Products were apparently mailed to customers in plain wrappings
marked with Pic catalog numbers, with no identification that they had been sent
from Adco rather than Pic. On its face this conduct would appear to be
"palming off" in its grossest form. See Remco Industries, Inc. v. Toyomenka,
Inc., 286 F.Supp. 948 (S.D.N.Y.), aff'd, 397 F.2d 977 (2d Cir. 1968);3 CocaCola Co. v. Foods, Inc., 220 F.Supp. 101 (D.S.D. 1963); Timken Roller
Bearing Co. v. Leterstone Sales Co., 27 F.Supp. 736 (N.D.Ill.1939).

At the outset defendant contends that, before a preliminary injunction can issue,
plaintiff has the burden of proving that the Pic name and Pic catalog numbers
have acquired a "secondary meaning," i. e., that a buyer using the Pic name or
catalog number intends to convey to the seller that he specifically wants a Pic
product. Under federal law, however, a registered trademark like "Pic" is
"prima facie evidence * * * of the registrant's exclusive right to use the mark in
commerce in connection with the goods or services specified in the certificate"
of registration. 15 U.S.C. 1057(b) (1964). Furthermore, under Massachusetts
law a plaintiff claiming unfair competition may show either "palming off" or
that the features of the product in question have acquired a secondary meaning
such that confusion as to its source is likely to arise if defendant is allowed to
copy them. Markham v. A. E. Borden Co., 108 F.Supp. 695, 710
(D.Mass.1952), rev'd on other grounds, 206 F.2d 199, 210 (1st Cir. 1953); see
also Hawley Products Co. v. United States Trunk Co., 259 F.2d 69, 76-77 (1st
Cir. 1958); Summerfield Co. of Boston v. Prime Furniture Co., 242 Mass. 149,
136 N.E. 396 (1922). Moreover, plaintiff has clearly satisfied any burden of

proving "secondary meaning" by submitting affidavits from the purchasing

agents of five of its customers stating that, when they order a Pic product, they
expect to receive a product supplied by Pic.4
6

Defendant's sole defense is that there is a trade custom in this industry which
permits undisclosed substitutions unless the buyer specifies "no substitutions."
The only evidence offered in support of this contention is an affidavit by
defendant's president, to wit:

"In my opinion, based on more than five years experience, it is thoroughly

understood by most, if not all, purchasing agents doing business with the
defendant that without indicating the substitution defendant has a right to
substitute a fully equal product for the one being ordered unless the customer
specifies `no substitutions.'"

When this statement is examined together with the counter-affidavits of the five
purchasing agents mentioned above, it is evident that the district court had
ample basis for disbelieving this "trade custom" defense.

Defendant cites several cases stating that a preliminary injunction should not be
granted on the basis of conflicting affidavits. But in each of those cases the
contentions of the opposing parties remained equally credible after the
affidavits had been submitted. For example, in General Electric Co. v.
American Wholesale Co., 235 F.2d 606 (7th Cir. 1956), plaintiff charged that
defendant had breached a "fair trade" agreement. In its counter-affidavit,
defendant admitted that the agreement had been breached in connection with
two sales but averred that those sales had been made inadvertently by a
temporary employee and were not part of an ongoing policy or practice. And in
Sims v. Greene, 161 F.2d 87 (3d Cir. 1947), plaintiff's affidavit that he was the
rightful bishop of the First Episcopal District of the African Methodist
Episcopal Church in Philadelphia was countered by defendant's affidavit that
plaintiff had been unfrocked in a special session of the Episcopal Committee of
the Church.5 On the other hand, there are cases where preliminary injunctions
have been granted on affidavits only. See, e. g., Safeway Stores, Inc. v. Safeway
Properties, Inc., 307 F.2d 495 (2d Cir. 1962); Ross-Whitney Corp. v. Smith,
Kline and French Laboratories, 207 F.2d 190 (9th Cir. 1953). It is true that in
these cases the court indicated that there was relatively little dispute of fact,
while in the present case defendant seeks to dispute a very basic fact. We agree,
however, that, with the prima facie case established by the trademark,
supplemented by the affidavits of disinterested witnesses, defendant's testimony
of a trade custom could properly be regarded by the district court as
insufficiently persuasive to require a hearing.

10

Next, defendant argues that plaintiff failed to make an adequate showing of

probable damage to the public and to plaintiff's good will. But plaintiff
submitted evidence that, on at least two occasions when a Pic product was
ordered, the non-Pic product substituted by defendant was notably inferior.
Furthermore, there was evidence that many manufacturers are specifically
required by contract to use Pic products. Yet defendant's president admitted that
it performed no quality control inspections on the non-Pic products it
substituted. Also, since some manufacturers are required to use Pic products, it
would appear likely that defendant's actions diverted to Adco at least some
business which otherwise would have gone to plaintiff. Cf. Unistrut Corp. v.
Power, 175 F.Supp. 294, 297 (D.Mass. 1958), aff'd, 280 F.2d 18 (1st Cir.
1960).

11

The district court enjoined defendant from filling any orders identified by the
Pic name or catalog number with non-Pic products until after receiving written
consent to such a substitution from the purchaser.6 Defendant contends that this
injunction is overly harsh because, shortly after this suit was initiated, it
voluntarily instituted the practice of orally informing each customer at the time
of his order that a non-Pic product would be substituted and noting on the
invoice that such a substitution had been made. Because much of its business
consists of telephone orders requesting immediate delivery, defendant
maintains that the requirement that it receive written confirmation prior to
shipment is unduly burdensome. It argues that its practice of oral notification
by phone followed by written notification on the invoice is fully adequate to
protect plaintiff's interests.

12

"The granting of a preliminary injunction pending final hearing is within the

sound discretion of the trial court, and such an order will be reversed on appeal
only upon a showing of abuse of that discretion." Safeway Stores, Inc. v.
Safeway Properties, Inc., supra, 307 F.2d at 500; Unistrut Corp. v. Power,
supra, 280 F.2d at 23; Esquire, Inc. v. Esquire Slipper Manufacturing Co., Inc.,
243 F.2d 540, 545 (1st Cir. 1957). In the instant case, the district court might
well have doubted the reliability of defendant's oral notification policy7 as well
as the effectiveness of notification by invoice. For example, there is evidence
that in many cases the employee in charge of ordering never sees the invoice
and may therefore never learn that a substitution has been made. In any event,
once the substituted component and invoice have been received, it is often too
late (in terms of a company's production schedule) to reorder. Furthermore, as
the district court noted, precision instrument components are admittedly only a
small portion of defendant's business. We did say in Electronics Corporation of
America v. Honeywell, Inc., 428 F.2d 191, 195 (1st Cir. 1970), that we "might
accept the principle that so far as a preliminary injunction is concerned * * *

voluntary reform will always suffice." (Emphasis added.) However, there we

had in mind an irrefutably demonstrated, total reform, whereas in the case at bar
the reform is neither demonstrated nor total. In view of the extent of defendant's
apparent misconduct and the lateness of its attempts at reformation, we find no
abuse of discretion on the part of the district court in granting this injunction.
Cf. United States v. W. T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed.
1303 (1953); United States v. Oregon State Medical Society, 343 U.S. 326,
333, 72 S.Ct. 690, 96 L.Ed. 978 (1952); Callmann, Unfair Competition,
Trademarks and Monopolies 88.2, at 180-185 (1970); Note, Developments in
the Law Injunctions, 78 Harv.L.Rev. 994, 1076 (1965).
13

Affirmed.

Notes:
1

15 U.S.C. 1125(a) (1964) provides:

"Any person who shall affix, apply, or annex, or use in connection with any
goods or services, or any container or containers for goods, a false designation
of origin, or any false description or representation, including words or other
symbols tending falsely to describe or represent the same, and shall cause such
goods or services to enter into commerce, and any person who shall with
knowledge of the falsity of such designation of origin or description or
representation cause or procure the same to be transported or used in commerce
or deliver the same to any carrier to be transported or used, shall be liable to a
civil action by any person doing business in the locality falsely indicated as that
of origin or in the region in which said locality is situated, or by any person
who believes that he is or is likely to be damaged by the use of any such false
description or representation."
In its complaint plaintiff did not allege explicitly that defendant's actions
affected interstate commerce. See Samson Crane Co. v. Union National Sales,
Inc., 87 F. Supp. 218, 221 (D.Mass.1949), aff'd, 180 F.2d 896 (1st Cir. 1950),
but it did allege that it is engaged in interstate commerce and that defendant's
actions have adversely affected its business. See Burger King of Florida, Inc. v.
Brewer, 244 F.Supp. 293, 297-98. (W.D.Tenn.1965); Tiffany & Co. v. Boston
Club, Inc., 231 F.Supp. 836, 841 (D.Mass.1964). In addition, affidavits were
submitted to prove that on at least two occasions defendant palmed off the
goods of a competing New York firm as if they had come from plaintiff. In any
event, plaintiff's diversity suit under the common law of unfair competition will

afford it the relief it is seeking here.

2

"Precision instrument components" are defined by plaintiff as mechanical

components, such as gears, racks, shafts, spacers, etc., which differ from the
usual run of gears, shafts and the like in that they are high precision,i. e., correct
in dimensions sometimes to as little as a few ten-thousandths of an inch.

InRemco the court defined "palming off" as "an attempt by one person to
induce customers to believe that his products are actually those of another." Id.
at 954. Palming off has been called the essence of unfair competition. Bechik
Products, Inc. v. Federal Silk Mills, Inc., 135 F.Supp. 570, 577 (D.Md.1955),
quoting Howe Scale Co. v. Wyckoff, Seamans and Benedict, 198 U.S. 118, 25
S.Ct. 609, 49 L.Ed. 972 (1905).

Two of the five affiants also stated that, even when they merely use a Pic
catalog number without specifying the Pic name, they expect to receive a Pic
product

See also Huber Baking Co. v. Stroehmann Brothers Co., 208 F.2d 464 (2d Cir.
1953); Hershey Creamery Co. v. Hershey Chocolate Corp., 269 F.Supp. 45
(S.D.N. Y.1967); Cement Enamel Development, Inc. v. Cement Enamel of
New York, Inc., 186 F.Supp. 803 (S.D.N.Y.1960). In four of the cases cited by
defendant the district court refused to grant the preliminary injunction of its
own accord. Sims v. Greene, supra, is the only case cited in which a court of
appeals actually dissolved a preliminary injunction because it had been granted
on the basis of affidavits.

The court required plaintiff to file a $10,000 bond "as security for the payment
of such costs and damages as may be incurred or suffered by the defendant if it
is found to have been wrongfully enjoined."

We note that in his deposition defendant's president claimed that defendant had
instituted an oral notification policy when it ceased to be a Pic distributor (May
26, 1969). There was evidence that no such notification was given in October
1969, however, and defendant's president later stated that the policy did not go
into effect until December 22, 1969. This contradictory testimony throws
further doubt on the reliability of the notification system proposed by defendant